High Court Sets Aside Rejection of Condonation Applications for Revised Returns for Five Assessment Years:

The petitioner had originally filed his income tax returns based on Form-16 issued by his employer, wherein the consideration received upon repurchase of Employee Stock Options (ESOPs) under the Flipkart Stock Option Scheme, 2012, was treated as salary income. Subsequently, he sought to revise the returns by treating such receipts as capital gains instead of salary, contending that the ESOPs had already vested in him and that the consideration could not be classified as salary merely because the options were not converted into shares before their repurchase.

Accordingly, the petitioner approached the Principal Commissioner of Income Tax under Section 119(2)(b) of the Income Tax Act, 1961, seeking condonation of delay in filing revised returns and claiming the consequential refunds. However, the applications were rejected through separate orders dated February 27, 2026, for all five assessment years.

Before the High Court, the petitioner argued that the authority had wrongly examined the merits of the proposed revised returns instead of considering the reasons for the delay and the genuine financial hardship explained in the applications. It was further submitted that the petitioner had quantified the refunds that would become available upon revision of the returns, but these details had not been considered.

The High Court observed that the jurisdiction under Section 119(2)(b) of the Act is meant to examine the cause for delay and the genuine hardship pleaded by the applicant.The Court held that the Principal Commissioner had effectively decided the taxability of the ESOP repurchase proceeds while considering the applications for condonation of delay. Since the authority had relied upon the AO's opinion on the merits rather than independently examining the reasons for delay and the genuine hardship asserted by the petitioner, the rejection orders could not be sustained.

Accordingly, the High Court quashed all five rejection orders dated February 27, 2026, and restored the corresponding applications for reconsideration. The petitioner was granted liberty to submit further justification.